Australian Unfair Contract Terms Regime Renders Foreign Class Action Waiver Clauses Void

The Ruby Princess Class Action 

One of the events which marked the arrival of COVID-19 in Australia was the mass infection of the passengers aboard the Ruby Princess cruise ship during its round-trip voyage from Sydney Harbour on March 8–19, 2020. The lead applicant commenced a class action in the Federal Court of Australia on behalf of 2,651 passengers against a global cruise operator and its Australian subsidiary (collectively, "Princess") for losses allegedly suffered by the passengers and their relatives.  

Princess sought a stay of these claims on the basis that some of the class members had contracted with the company under the US terms and conditions ("US subgroup") and these terms and conditions included a class action waiver clause, a choice of law clause (applying the general maritime law of the United States) and an exclusive jurisdiction clause in favour of the US district courts. The lead plaintiff for the US subgroup was a Canadian passenger,  Mr Ho, who had booked the cruise through a Canadian travel agent.  

While the primary judge initially refused Princess's stay application, this decision was reversed by the Full Court of the Federal Court on appeal, before heading to Australia's final court of appeal, the High Court of Australia.

The High Court of Australia's Decision 

The High Court's first significant holding was that the regime prohibiting unfair contract terms in Part 2-3 of the Australian Consumer Law extended to conduct engaged outside Australia by a body corporate carrying on business within Australia. Australian courts have the power to strike down contractual terms judged to be "unfair" under the ACL. While the High Court accepted this could lead to extreme situations where contracts made outside Australia for transactions with consumers outside Australia would be subject to the ACL, the High Court said these anomalous results could be dealt with through other means, such as the forum non conveniens doctrine. 

Second, the High Court determined that the class action waiver clause in the US terms and conditions was "unfair" when evaluated under the ACL and struck it down as void, because: 

• The class action waiver clause appeared in a standard form contract and created a significant imbalance in the parties' rights;
• Under the ACL, Princess bore the burden, and did not establish, that the clause protected a legitimate interest; and
• The class action waiver clause operated to the detriment of the US subgroup and was not transparent—the clause could only be viewed after receipt of the booking confirmation email and navigating a series of webpages.  

The High Court also observed that courts in the United States (including the US Supreme Court) have held class action waiver clauses are not fundamentally unfair. However, these authorities were to be approached with caution, given they did not deal with the ACL or the Australian class action legislation, many arose in the different context of class arbitrations and the tests adopted in them are different.  

Finally, the High Court determined that the claims of the US subgroup in this case should not be stayed. Although the US terms and conditions contained an exclusive jurisdiction clause (which all parties accepted was valid), there were strong reasons to decline a stay:  

• The unenforceability of the class action waiver clause in Australia meant the US subgroup had a strong juridical advantage in remaining part of the class action; and 
• Enforcing the exclusive jurisdiction clause would result in fracturing the litigation. Forcing the US subgroup to litigate essentially identical claims in the United States would have the undesirable consequence of wasting the parties' resources and would run the risk of producing conflicting outcomes in different courts.